A Big Bang in India!

comments 0

Comment

share

Share

0

Rate

Andy Tay Kah Ping's picture

A Big Bang in India!

The ‘Big Bang’ reforms, is just the right word some economists used to describe the recent economic proposals by India’s Prime Minister, Manmohan Singh, in the financial, energy and retail sectors. The description is apt. Firstly, similar to the big bang theory, India’s economic reforms are magnificent. One can expect an influx of foreign direct investments (FDIs) into India, boosting employment and promoting developments. Secondly, just as no one truly knows if the big bang theory led to life on Earth, no one knows for certain if India would commit to its reforms and execute them just like in 1991. However, it is worthy to note although the current social, economic and political forces within India differ from the 1990s, and challenges exist in implementing the reforms, they can be overcome with stronger recognition of the unique Indian culture, clamping down corruption and repairing relations between the federal and state governments.

One should remain optimistic that India’s economic reforms would be executed just like those in 1991 but with faster speed and stronger motivation. In contrast to 1991, India has made leaps in social developments that can facilitate unwavering decisions to execute the reforms. India has a rising number of young populations who are educated and well-connected through information technology. This group of young, potential leaders can help shape the nation’s responses to the introduced reforms. The influence of the young people can be observed in the recent rape case of Miss Jyoti, where young people paraded the streets with boards clamouring for gender equality. Such reactions to rape cases are shocking as women are still considered traditionally as object and the magnitude of the public sentiments is unprecedented. The huge public outrage stems not only from the appalling lack of respect for women and the substandard quality of the police, but also from the rising voices of the educated, young people who want to partake in shaping their nation’s policies. A more liberal and connected young population can show their support for the liberal economic policies through grassroots efforts such as informing their communities on the fruits of such reforms or even sharing on social media. Almost half of current India’s population is born in the past two decades1 and are too comfortable with near double digit economic progress that a reduced growth would hurt them. Demographic changes from the 1990s can thus help in accelerating reform implementations.

The economic advances Indians witnessed among different states of India and between India and China may help to execute the economic reforms too. China has made more significant leaps in socio-economic developments as compared to India because of the former’s open-door policies for FDIs. Indians are aware of their difference with China but they are ambitious2 and they remain hopeful to become the next leader on the international platform. Within India, citizens can see the positive impact of FDIs, unfortunately, from the contrasting state policies towards FDIs and the unequal developments of each state. Gujarat, under the leadership of Mr Modi, has been a popular destination for FDIs which helped spur infrastructure and environmental developments. Gujarat has also won awards for its Bus Rapid Transit System (BRTS) and its compressed natural gas policy. Indians know the perks of having open-door economic policies and individuals have migrated to flourishing states like Gujarat in search of employment.3 The popularity of Mr Modi and his liberal economic policies may point to the trend of rising number of people believing in the impact of more economic openness. Therefore, it may be expected that Indians’ hunger for employment could facilitate the implementations of the reforms with stronger motivation.

The current political climate in India may also make Mr Singh more determined to commit to his economic reforms. Despite facing opposition to his reforms, there are promising incentives for Mr Singh to remain faithful to his plans. His party has been plagued with damaging corruption accusations in the mining industry due to loopholes in regulations.4 The worrying poor public service such as in the police force also continues to weaken the public’s faith in Mr Singh’s administration. Therefore, the debates on FDIs are opportune for Mr Singh to divert attention from the negativity associated with his leadership as after-all, lively civil debates of a more liberal economy would generate mixed responses which are certainly more beneficial than those from damaging scandals. In fact, pursuing liberal economic reforms seem less risky considering that this pursuit is itself, perhaps the only opportunity left for Mr Singh to summon his political will and leave a legacy as the Prime Minister of India. Indian National Congress (INC) faces plunging popularity amidst the scandals and lacklustre performance in generating employment for the growing number of young people. Some politics analysts have even suggested that Bharatiya Janata Party (BJP) may become the leading political party by the next national election. This is a time of political crisis for BJP and Mr Singh understands that maintaining status quo would probably be insufficient for his party to remain in power. The urgency to boost popularity can promote stronger commitment to liberal economic reforms as they may be the last few straws Mr Singh has left on his hands.

With a more open business climate, one can expect positive gains for both the private companies (local and international) and public (government and people). The entry of foreign supermarkets like Walmart can help drive costs low for the impoverished Indians and promote efficiency in the supply chains. While small shops may be affected due to low economies of scales, this can serve as wake-up calls for them to differentiate their services to retain their customers. The government has also promised Indians suppliers that at least 30% of the supplies sold in foreign supermarkets need to be locally produced, ensuring that the suppliers can benefit from the more efficient distribution processes, more stable transactions and the removal of unscrupulous middlemen. Foreign companies would also be allowed to engage in equity stakes activity, allowing for the influx of capital to support the growth of Indian companies.

It is equally meaningful to ponder over the long term changes that such liberal economic reforms can potentially create. With stronger economic power, India would be better represented as a world leader. This is important considering the fluctuations in US-China ties and the rising dominance of China over issues such as the control over the islands in East China Sea. India can provide the pivot to correct the current imbalance in world power. Other than political impact, a transformed India with the help of more open-door policies can too convince socialist countries on the benefits of embracing liberal economic reforms. This can help spur developments around the world, and hopefully, alleviate the millions who remain impoverished.

However, before India executes any economic reforms, it has a few tasks to accomplish. Firstly, India needs to clamp down on corruption at national and grassroots level. Petty corruption is rampant in India and it stems from poor public service education and training. This has to be corrected with stricter selection criteria for law enforcers. India also needs to reduce big-ticket corruption to restore the investors’ faith about doing business in India. Secondly, the existing Indian political parties need to reconcile their differences and look at the big picture. This is difficult because different parties are motivated to stay in power and they may be voted in for juxtaposing reasons such as for being liberal or conservative. However, all Indians want better lives and with this common aim, different parties can try compromising to reach a consensus. Thirdly, India needs to be less ambitious. Indians are optimistic but sometimes, excessively. The pursuit of more liberal economic reforms need to take place progressively to not hurt the locals such as farmers while ensuring that the right signals are sent to the foreign companies. Lastly, the Indian government should try to engage the foreign companies in corporate social responsibilities that have allowed successful national corporations such as TATA and Anand Milk Union Limited (Amul) to thrive. Indians believe in giving back to the community and often such philanthropic practices help companies to assimilate into the Indian culture and be accepted as part of them. Similarly, foreign companies such as Walmart which may introduce a plan to sponsor hungry students are likely to be integrated into the Indian society too.

There is growing evidence suggesting that the ‘Big Bang’ theory may be the key to explain the origins of life on Earth. Nonetheless, competing explanation such as steady state theory exists as well. There can be many different outcomes for India’s economic reforms. Would it yield the same impact as the reforms in 1991? Could the recent reforms be the key for Indians to rise up to power and for the under-represented nation to be more recognised as a world power? Just like the process of a scientific discovery, Mr Singh needs to stay focused on his goals and reveal the answers using the available resources he has.

References

  1. Bloom, D. E. (2011). Population Dynamics in India and Implications for Economic Growth. Boston: Program on the Global Demography of Aging.
  2. The Indian Express (2010, June 24). Indian Express. Retrieved February 3, 2013, from India: http://www.indianexpress.com/news/indians-are-the-most-ambitious-workers...
  3. Mahadevia, D. (2002). The Poverty and Vulnerability of Migrant Workers in India. Ahmedabad: Centre for Environmental Planning and Technology Ahmedabad, India.
  4. Thakurta, P. G. (2011, August 11). BBC News. Retrieved February 3, 2013, from Southeast Asia: http://www.bbc.co.uk/news/world-south-asia-14486290